Division of property is a rigorous process. It requires identifying marital assets and debts, property valuation and equitable distribution. It gets more complex, however, when the involved asset is a real property or a business because it requires an accurate assessment of value before the court can divide the same equitably to the spouses.
Determining the property value
Usually, a professional appraisal by a valuation expert is necessary to accurately determine the value of businesses. In order to do so, the specialist will look into financial records and other business documents to gather information on the fair market value of the business and each spouse’s contribution to the company.
We got the value. Now what?
Once the court determines the value of the business, it will evaluate the unique circumstances of the case and consider the different methods to split the same between spouses. The court may order either:
- One spouse to buy the business interests of the other
- The sale of the business and split of proceeds between spouses
- The joint ownership and operation of the business
It is good to note that the court will choose the best option based on each spouse’s involvement in the business, financial capability in case of buyouts and the ability to retain a civil relationship for the third option.
With divorce comes a substantial change in finances for each party. Businesses usually provide additional income to working spouses and act as the primary source of earnings for nonworking ones. And if spouses decide to separate, a marital business will be part of the property division. A properly conducted property division is essential to minimize financial losses and protect each party’s rights to their marital asset shares.